Missouri Economic Diversity 2017

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by  Missouri Department of Economic Development, Missouri Economic Research and Information Center

Missouri Economic Indicator Brief:

Economic Diversity 2017

Diversification Index

A diversified economy is one with many industries that can better manage fluctuations in the business
cycle. By contrast, a less diversified economy specializes in only a few industries. A state economy with
a disproportionate number of workers in one specific industry would suffer should that industry fall on
hard times; whereas, a diversified economy is more balanced. A balanced economy is capable of
absorbing an economic shock through the other industries present. If a shock were to occur, other
industries help to compensate for the loss by helping to maintain economic stability for that state.

In 2017, Texas was the most diversified state in the country followed by Pennsylvania, North Dakota,
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Nebraska, Colorado, and Georgia. Missouri ranked seventh in the index ,same as the previous year.
The map below shows each state’s 2017 score.

Economic Diversity Index 2017
United States
3. 0 1
Score
D
1.3% -13_0%
LJ5.0%-7.2%
- 4.1%-4.9%
o HI - 3.4%-4.0%
~,, 6.4
6 . 2.5%-3.3%
The lower a score, the more diversified a state's economy; the higher a score, the more specialized its economy.
MISSOURI ECONOMIC RESEARCH AND INFORMATION CENTER ■ MISSOURI DEPARTMENT OF ECONOMIC DEVELOPMENT

JANUARY 2019
Gross Domestic Product

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The broadest measure of economic activity is the Gross Domestic Product. In calculating each
state’s diversification index, the gross product by industry was measured against total state gross
product.
Government
MMaisnsuofuarcit’su rtiontgal gross domestic product (GDRPe)a iln Ecsrteaatseed from $273.1 bHiellaioltnh iCna 2r0e16 to $275.5
Fbiinllaionnc ein a 2nd0 1In7s iunr arenacle terms. The state’s tPorpo ffeivsesi oinndaul,s Stcriieens,t nifoict, ianncdlu Tdeicnhgn ical Services, are
(12.6 percent of total GDP), (11.4 percent), (9.0 percent),
(7.4 percent) and both at 7.1
percent. Professional, Scientific,
a nd Technical, ; Healthcare & Social Assistance
Service sectors that expeInrifeonrmceadt igorno wth between 2016 and 2017 incluWdheo lesale Trade
whichgreEwd u0c.6a tpioenrcael nSte rfrvoicmes 6 .5 to 7.1 Accgormewm 0od.5a tion
&pe Froceond tS ferrovmic e8s.5 to 9.0; grew 0.4 percent from 3.6 to 4.0; grew 0.3
percent from 6.5 to 6.8; Manufacturing, grew0.2 percent from 1.1 to 1.3; and Finance &
Insurance grew 0.1 percent from 2.8 to 2.9 perRceetnati lG TDrPad sehare. Among sectors that
experienced decline include which declined 1.0 percent from 13.6 to 12.6;
declined 0.5 percent from 7.9 to 7.4; and declined 0.3 percent from 6.2 to 5.9
percent.
Missouri Industry GDP Share

Change from
Industry 2017 2016
2017-2016
Natural Resources 1.1% 1.2% -0.1%
Mining 0.2% 0.3% -0.1%
Utilities 1.7% 1.8% -0.1%
Construction 3.7% 3.8% -0.1%
Manufacturing 12.6% 13.6% -1.0%
Wholesale trade 6.8% 6.5% 0.3%
Retail trade 5.9% 6.2% -0.3%
Transportation & Warehousing 3.4% 3.5% -0.1%
Information 4.0% 3.6% 0.4%
Finance & Insurance 7.4% 7.9% -0.5%
Real estate and rental and leasing 11.4% 11.4% -
Professional, Scientific, and Technical 7.1% 6.5% 0.6%
Management of Companies & Enterprises 3.0% 3.0% -
Administrative & Waste Management 3.0% 3.0% -
Educational Services 1.3% 1.1% 0.2%
Healthcare & Social Assistance 9.0% 8.5% 0.5%
Arts, Entertainment, & Recreation 1.1% 1.2% -0.1%
Accommodation & Food Services 2.9% 2.8% 0.1%
Other Services (except Government) 2.4% 2.4% -
Government 12.0% 12.0% -

MISSOURI ECONOMIC RESEARCH AND INFORMATION CENTER ■ MISSOURI DEPARTMENT OF ECONOMIC DEVELOPMENT

JANUARY 2019
State Industry Concentration

Industry concentration is another measurement based on industry GDP share analysis. The chart
below compares the same industries across Missouri and the United States to hHeelpa litdhecnatriefy, state-
lMevaenlu ifnadcutusrtirnyg conceMntarnaatigoenms.e nTth oref eC oinmdpuasntrieiess & i nE nptaerrtpicruisleasr have significantly higher GDP share
concentrations in the State of Missouri than that of the UWnihtoelde sSatlaet eTsr aindcel,u Rdeitnagi l Trade,
Transportation, &an Wd arehousing, Other Services Utilities, N. a Otuthraerl Rcoesnocuernctersations in Missouri,
which have higher rates than that of the nation, include
, and .

2017 GDP Share
Industy Concentration
,■. Missouri
United States
Natural Resources ~
•
Mining
Utilities
Construction
Manufacturing
Wholesale Trade
Retail Trade
Transportation & Warehousing
Information
Finance & Insurance
Real Estate, Rental, and Leasing
Prof., Scientific, and Technical
Mgt. of Companies & Enterprises
Admin. & Waste Management
Educational Services
Healthcare & Social Assistance
Arts, Entertainment, & Recreation ~
Accommodation & Food Services
Other Services (except Gov.)
Government
0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0%

MISSOURI ECONOMIC RESEARCH AND INFORMATION CENTER ■ MISSOURI DEPARTMENT OF ECONOMIC DEVELOPMENT

JANUARY 2019
Notes

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Diversification Index
There are a handful of indices available to measure an economy’s diversification: Herfindahl,
Hachman, and competitive share among others. Data used to construct an index may include
employment, earnings, per capita income, capital investment or gross domestic product. In this
i
brief, a modified Herfind a=hl In{deΣx (H) based o(n( gross d)ome(stic pro)d)uct} data was constructed.
Hi n si n × GDPi _ 1 2 * 100
n-1 GDP n
s

n GDP
i
i GDP
s
Where is tnhe number of industries ins the state economy, and is the gross domestic product

for each industry ( ) in the state, and is a state’s total gross domestic product. The number of
industries ( ) analyzed in each state ( ) is constant. Thus, the analysis focuses on the distribution of
GDP. Those states with an index value closer to 0 are more diversified.

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Gross Domestic Product
A state’s Gross Domestic Product is estimated by the U.S. Bureau of Economic Analysis. This
e stimate is the sum of value-added from each industry in the state for a given time period. Value-
added is effectively an industry’s net revenue: income minus costs of production.
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MISSOURI ECONOMIC RESEARCH AND INFORMATION CENTER ■ MISSOURI DEPARTMENT OF ECONOMIC DEVELOPMENT

JANUARY 2019